The Risk-Averse Entrepreneur

Once-fearless entrepreneurs who respond to success by avoiding risk and change can strangle their businesses

To be successful in entrepreneurial ventures, you have to project a powerful image. No successful entrepreneur I know would want to be likened to the cautious, self-effacing tortoise of Aesop's fable. Sure, the tortoise eventually won out over the hare, who was full of braggadocio, but in business, no one respects a chief executive who has lost the will to stick his neck out. In fact, one of the most common problems I encounter in companies rife with employee dissatisfaction is anger toward a CEO who has become timid and hesitant. From the employees' perspective, a CEO hiding tortoiselike within his shell has violated his implicit promise to continually dare the devil and beat him.

I first encountered that problem more than a decade ago, when an entrepreneur I'll call Tom approached me, feeling "scared crazy" and wanting to sell his business rather than continue an ongoing struggle with his executive team. Although Tom had built a highly successful niche-specific catalog business, he was in constant conflict with his key managers, who urged him to diversify into new markets. Now, Tom didn't object to minor diversification in his catalog's offerings, but he was firmly committed to sticking to the core competency that had brought him success.

Why, Tom's management team wondered, had he become such a hypercautious tortoise after achieving success? The thing that most commonly drives a person to the protective posture exhibited by Tom is what psychologists call risk aversion. Risk-averse people are prone to experience anxiety that blocks them from taking any action that may be risky, once they've attained a certain level of success.

Risk aversion among successful entrepreneurs is more widespread than you'd imagine. With surprising regularity, formerly fearless entrepreneurs respond to success by holding the reins on risk and change so tightly that they end up strangling their businesses. That stranglehold typically encircles the throats of those high-energy employees who were attracted to the CEO in the early days, when he projected a bolder image.

People who suffer severe cases of risk aversion hold the belief, often unconsciously, that their success was a function of luck or, in the extreme, fraudulence. In those instances, the risk-averse person isn't merely protecting wealth or a successful status, he's guarding against the discovery that the success he called his own was undeserved or, worse yet, stolen from someone else. I've worked with people who, fearing that their success was a function of the insights of others or of serendipity, would go so far as to fire everyone who greatly contributed to their success, or move to dissolve their businesses, rather than chance losing the gains in self-esteem that success had afforded them.

But most cases of risk aversion are not the product of a psychological disorder. Tom's circumstance is more the norm. When he hit it big, he was 49 years old--clearly not ready for retirement but, as he put it, "more than a half step slower than I was in my twenties." Moreover, before his success he had twice been the victim of jealous business associates who, in a word, screwed him. Having been burned severely, Tom was exceedingly shy of risking his current success and felt unwilling to fight to continue to grow his business. His psychological problem was that he felt ashamed of admitting his lack of personal power to his employees.

In that regard Tom, once again, is not alone. Nowhere in our culture, particularly in the business world, do we see people rewarded for admitting feelings that suggest a lack of drive or imply a sense of satisfaction with the status quo. But somewhere between the call for constant change and Tom's risk aversion lies a healthy middle ground, where stepping off the fast track does not necessarily imply having one foot in the grave.

The first step in achieving that sense of psychological satisfaction involves coming to grips with the unique connotation our culture has put on the term success. We all have a tendency to forget that succeeding at something or in a particular field does not make us "a success. " Yet the language we use to describe success, in conjunction with certain perceptual biases, conspires to make us forget to restrict our judgments about those who reach the top of their game, and often we imbue those people with a bigger halo than they deserve. Haven't you ever wondered why, when professional athletes or movie actors become full-fledged stars, suddenly those "successes" are expected to have important insights on the most difficult problems facing mankind?

If it weren't for the fact that succeeding at something creates a favorable bias that the successful are loath to relinquish, an entrepreneur like Tom would have intuitively realized that his lack of "fight" or perceived power after his success could have been addressed by hiring a hungry young president to report to him. But people have a problem doing that, which probably stems from the feeling that success is binary: you win or you lose. People often don't recognize the advantages of taking half a loaf rather than none when it comes to success, because they fail to recognize the option even exists. By saying, "I've lost the energy to fight but not the smarts to mentor," Tom could have declared himself physically weak but psychologically strong, and in so doing could have functionally quit the entrepreneurial game while he was ahead.

The good news is that more and more entrepreneurs are learning to play the game of business "smart" rather than "hard" and find elder-statesperson status rewarding. But what should you do if you find yourself suffering with a boss like Tom, now languishing in his corner office, no longer the hard-driving person you went to work for? In a phrase, praise him out of your way.

CEOs who are afraid to admit risk aversion cannot be bullied, cajoled, or coerced into relinquishing their choke hold on an organization's healthy developmental drives. Their fears are embedded in a web of conflict that not even professionals may be able to correct.

But you can ease the anxiety of the risk averse by showing your appreciation of their intellectual contributions to your company's past success and acknowledging their potential contribution to further growth. Rather than threatening a mutiny or the dissolution of the business, propose to the CEO that by taking only minimal risks--like an allotment of "development time" or some minor seed capital--he can still give expansion-minded employees the opportunity to flourish. Remember, the risk-averse CEO is like the tortoise; he'll endorse only slow and steady movement that doesn't threaten his security.

Steven Berglas is a management consultant and psychologist on the faculty of Harvard Medical School.